Tech Weakness Weighs on Indexes as Defensive Rotation Gains Momentum

U.S. equities faded from modest early gains and finished lower as another bout of weakness in large-cap technology stocks offset improving breadth across the broader market. The S&P 500 slipped 0.2%, the Nasdaq Composite fell 0.6%, and the Dow Jones Industrial Average eased 0.1%, with losses in the information technology sector (-1.0%) once again acting as the primary drag on the major averages.

Pressure remained concentrated in mega-cap and AI-linked names. Broadcom and Oracle extended their post-earnings declines, reinforcing last week’s pullback in the AI trade. Apple and Microsoft also traded lower, while NVIDIA managed a modest gain, offering only limited offset to the broader tech weakness.

ServiceNow was a notable laggard, posting the largest loss in both the technology sector and the S&P 500. Shares fell sharply after reports that the company is exploring a roughly $7 billion acquisition of Armis, a move that prompted a downgrade at KeyBanc and renewed valuation concerns.

The communication services sector also finished lower, weighed down by softness in its largest components. Alphabet edged down, but headlines surrounding its potential move to integrate real estate listings directly into search results had a much larger impact on related stocks. Zillow and CoStar Group both suffered steep losses on concerns that such a shift could disrupt traditional real estate listing platforms.

Energy stocks added to the market’s downside as crude oil prices declined, with oil futures settling lower at $56.82 per barrel. The energy sector finished down 0.8%.

Despite the weakness at the index level, underlying market participation was more constructive, driven by continued rotation away from technology and into defensive and select cyclical areas. Health care led the market higher, rising 1.3%, as a majority of its components advanced. Bristol-Myers Squibb jumped following an upgrade from Bank of America Securities, while Eli Lilly extended last week’s rebound from recent lows.

Other defensive groups also attracted buying interest, with utilities and consumer staples finishing higher. The consumer discretionary sector stood out among cyclical areas, supported by strength in Tesla after reports that the company is testing its robotaxi service in Austin without a human safety driver. Travel-related stocks also contributed, as cruise lines, hotel operators, and online travel services posted solid gains.

This rotation allowed the S&P 500 Equal Weighted Index to edge higher and outperform the market-cap-weighted S&P 500. Smaller-cap stocks, however, did not participate in the shift, with both the Russell 2000 and S&P MidCap 400 closing lower.

On the policy front, President Trump indicated that his shortlist for the next Federal Reserve chair has narrowed to National Economic Director Kevin Hassett and former Fed Governor Kevin Warsh, reviving debate over the future direction and independence of monetary policy. Fed officials largely echoed the tone of last week’s FOMC meeting, with New York Fed President John Williams expressing confidence in a return to solid growth and easing inflation, while Fed Governor Stephen Miran reiterated his view that faster policy easing may be needed to support the labor market.

Attention now turns to the November Employment Situation Report, due tomorrow. The release carries added significance after Fed Chair Powell suggested that recent jobs data may have overstated hiring strength, leaving investors alert to potential surprises that could influence near-term policy expectations.

Our FTinvest 11 model portfolio posted a modest gain, adding 0.22% for the day and closing at 930.22, extending its advance while the broader market remained mixed.

The index traded in a relatively tight range, reflecting a more selective risk environment across equities, but managed to hold positive territory into the close. Strength in several core components offset pockets of profit-taking, allowing FTinvest 11 to outperform a number of major benchmarks that struggled to generate clear directional momentum.

From a technical perspective, the index continues to consolidate near recent highs, suggesting that underlying demand remains intact despite increased volatility in mega-cap and AI-related stocks across the broader market. The ability to defend gains on quieter sessions remains a constructive signal for near-term trend stability.

Overall, today’s advance reinforces the resilience of FTinvest 11, as the portfolio continues to build on its recent performance and maintain leadership relative to the broader equity market.